Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector
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Summary:
The credit risk measures we develop in this paper are used to investigate macrofinancial linkages in the Mexican banking system. Domestic and external macro-financial variables are found to be closely associated with banking soundness. At the aggregate level, high external volatility and domestic interest rates are associated with higher expected default probability. Though results vary substantially across individual banks, domestic activity and U.S. growth, and higher asset prices, are generally associated with lower credit risks, while increased volatility worsens credit risks. The expected default probability is also found to be a leading indicator of traditional financial stability indicators.
Series:
Working Paper No. 2009/109
Subject:
Bank soundness Banking Commercial banks Credit risk Financial institutions Financial regulation and supervision Financial sector policy and analysis Financial statements Nonperforming loans Public financial management (PFM)
English
Publication Date:
May 1, 2009
ISBN/ISSN:
9781451872569/1018-5941
Stock No:
WPIEA2009109
Pages:
32
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